Jefferies (JEF)

Investment banking firm Jefferies Financial Group (NYSE:JEF) beat Wall Street’s revenue expectations in Q3 CY2025, with sales up 21.6% year on year to $2.05 billion. Its GAAP profit of $1.01 per share was 26.2% above analysts’ consensus estimates.

Company Overview

Tracing its roots back to 1962 and rebranded from Leucadia National Corporation in 2018, Jefferies Financial Group (NYSE:JEF) is a global investment banking and capital markets firm that provides advisory services, securities trading, and asset management to corporations, institutions, and wealthy individuals.

Investment banks and brokerages facilitate capital raises, mergers and acquisitions, and securities trading. The sector benefits from corporate activity during economic expansion, increased retail trading participation, and advisory opportunities in emerging sectors. Headwinds include economic cycle vulnerability affecting deal flow, compressed trading commissions due to electronic platforms, and regulatory capital requirements constraining certain higher-risk activities.

Jefferies Financial Group competes with major global investment banks including Goldman Sachs (NYSE:GS), Morgan Stanley (NYSE:MS), JPMorgan Chase (NYSE:JPM), and Bank of America's Merrill Lynch (NYSE:BAC), as well as boutique investment banks like Evercore (NYSE:EVR) and Lazard (NYSE:LAZ).

Examining a company’s long-term performance can provide clues about its quality. Any business can put up a good quarter or two, but many enduring ones grow for years. Regrettably, Jefferies’s revenue grew at a mediocre 6.6% compounded annual growth rate over the last five years. This was below our standard for the financials sector and is a tough starting point for our analysis.

We at StockStory place the most emphasis on long-term growth, but within financials, a half-decade historical view may miss recent interest rate changes, market returns, and industry trends. Jefferies’s annualized revenue growth of 21% over the last two years is above its five-year trend, suggesting its demand recently accelerated. Note: Quarters not shown were determined to be outliers, impacted by outsized investment gains/losses that are not indicative of the recurring fundamentals of the business.

This quarter, Jefferies reported robust year-on-year revenue growth of 21.6%, and its $2.05 billion of revenue topped Wall Street estimates by 8.4%.

Revenue growth is one major determinant of business quality, and the efficiency of operations is another. For Investment Banking & Brokerage companies, we look at pre-tax profit rather than the operating margin that defines sectors such as consumer, tech, and industrials.

This is because for financials businesses, interest income and expense should be factored into the definition of profit but taxes - which are largely out of a company's control - should not.

Over the last four years, Jefferies’s pre-tax profit margin has fallen by 14.5 percentage points, going from 27.3% to 12.8%. Luckily, it seems the company has recently taken steps to address its expense base as its pre-tax profit margin expanded by 3.4 percentage points on a two-year basis.

Jefferies’s pre-tax profit margin came in at 16.2% this quarter. This result was 1.2 percentage points better than the same quarter last year.

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

Jefferies’s unimpressive 5.6% annual EPS growth over the last five years aligns with its revenue performance. This tells us it maintained its per-share profitability as it expanded.

Like with revenue, we analyze EPS over a more recent period because it can provide insight into an emerging theme or development for the business.

Jefferies’s two-year annual EPS growth of 45.2% was fantastic and topped its 21% two-year revenue growth.

We can take a deeper look into Jefferies’s earnings quality to better understand the drivers of its performance. Jefferies’s pre-tax profit margin has expanded over the last two yearswhile its share count has shrunk 4%. These are positive signs for shareholders because improving profitability and share buybacks turbocharge EPS growth relative to revenue growth.

In Q3, Jefferies reported EPS of $1.01, up from $0.75 in the same quarter last year. This print easily cleared analysts’ estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street expects Jefferies’s full-year EPS of $2.91 to grow 31.9%.

The balance sheet drives profitability for financial firms since earnings flow from managing diverse assets and liabilities across multiple business lines. As such, valuations for these companies concentrate on capital strength and sustainable equity accumulation potential across their varied operations.

When analyzing this sector, tangible book value per share (TBVPS) takes precedence over many other metrics. This measure isolates genuine per-share value and provides insight into the institution’s capital position across diverse operations. Traditional metrics like EPS are helpful but face distortion from the complexity of diversified operations, M&A activity, and various accounting rules that can obscure true performance across multiple business lines.

Jefferies’s TBVPS grew at a sluggish 2.9% annual clip over the last five years. On a two-year basis, however, dynamics have changed as TBVPS dropped by 5.3% annually ($37.19 to $33.38 per share).

Return on equity, or ROE, tells us how much profit a company generates for each dollar of shareholder equity, a key funding source for banks. Over a long period, banks with high ROE tend to compound shareholder wealth faster through retained earnings, buybacks, and dividends.

Over the last five years, Jefferies has averaged an ROE of 8.5%, uninspiring for a company operating in a sector where the average shakes out around 10%.

Jefferies reported $12.05 billion of cash and $32.01 billion of debt on its balance sheet in the most recent quarter.

As investors in high-quality companies, we primarily focus on whether a company’s profits can support its debt.

With $1.11 billion of EBITDA over the last 12 months, we view Jefferies’s 18.0× net-debt-to-EBITDA ratio as inadequate. The company’s lacking profits relative to its borrowings give it little breathing room, raising red flags.

It was good to see Jefferies beat analysts’ EPS expectations this quarter. We were also excited its revenue outperformed Wall Street’s estimates by a wide margin. Zooming out, we think this was a solid print. The market seemed to be hoping for more, and the stock traded down 1.8% to just over $65 immediately after reporting.

Updated: December 4, 2025 at 11:20 PM EST

Before investing in or passing on Jefferies, we urge you to understand the company’s business quality (or lack thereof), valuation, and the latest quarterly results - in that order.

Aside from its balance sheet, Jefferies is a pretty decent company. Although its revenue growth was mediocre over the last five years, its growth over the next 12 months is expected to be higher. We advise investors to be cautious with this one, however, as Jefferies’s declining pre-tax profit margin shows the business has become less efficient.

Jefferies’s P/E ratio based on the next 12 months is 1.2x. All that said, we aren’t investing at the moment because its balance sheet makes us balk. We think a potential buyer of the stock should wait until the company’s debt falls or its profits increase.

Wall Street analysts have a consensus one-year price target of $64.60 on the company (compared to the current share price of $58.75).